British ‘Flash Crash’ trader pleads guilty in US

WASHINGTON: The British financial trader accused of manipulating markets and causing the 2010 “Flash Crash” in US stocks pleaded guilty in a Chicago court Wednesday to fraud charges, authorities said.

Navinder Singh Sarao, a 37-year-old working out of a modest suburban home in Hounslow in west London, allegedly made tens of millions of dollars with a computer program that could automatically manipulate prices.

He was extradited to the United States on Tuesday and entered the guilty plea to one count of wire fraud and one count of “spoofing,” an illegal stock manipulation technique, in the Chicago federal district court, the Justice Department said.

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“Navinder Sarao abused sophisticated technology to make a quick profit, and jeopardized the integrity of US financial markets,” said Assistant Attorney General Leslie Caldwell.

“By flooding the marketplace with bogus orders, his scheme victimized countless individuals,” she said in a statement.

Sarao agreed to forfeit nearly $13 million in gains and faces up to 30 years in prison, spokeswoman Erica Lacy said.

Meanwhile, the US Commodity Futures Trading Commission announced that was seeking to monetary sanctions of $38 million in the case against Sarao.

A grand jury indicted Sarao last year, accusing him of earning $40 million (36 million euros) through “spoofing” the market with fake orders between 2010 and 2014 to move the prices of securities like the E-Mini S&P futures contract on the Chicago Mercantile Exchange.

The indictment detailed how he built a system with the help of programmers specifically designed to help him repeatedly issue and cancel simultaneous sell-and-buy orders in key securities to make the prices go in the direction he wanted.

Emails cited in the indictment made clear he knew what he was doing.

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“I need to know whether you can do what I need, because at the moment I’m getting hit on my spoofs all the time and it’s costing me a lot of money,” he told a programmer.

His activities were blamed for the sudden market crash of May 6, 2010, when the Dow Jones Industrial Average plunged 600 points in a matter of minutes, wiping hundreds of billions of dollars from share values.

Sarao allegedly raked in $789,000 in profits on real E-Mini contract trades made that day.

The indictment said Sarao had repeatedly rebuffed probes by regulators, insisting that he was just a fast-fingered normal trader not relying on computer programmes for trading. He also brushed off warnings that his activity was illegal and continued to trade.

Sarao was arrested in London in April 2015 and was granted bail after months in jail after admitting he had parked some $31 million in assets in Switzerland, according to Bloomberg.